After the Ethereum merge, DVT distributed validation will become an important key technology

Original Title: "The Importance of DVT Distributed Validator Technology After Ethereum Merge"
Source: TinTinLand

On September 15, 2022, the Ethereum blockchain completed its most significant merge in seven years, transitioning from a Proof of Work (PoW) to a Proof of Stake (PoS) consensus mechanism. Aside from reducing energy consumption and lowering barriers to entry, there are concerns that the PoS consensus mechanism may lead to greater network centralization, as it grants more voting power to those holding a large number of stakes. Therefore, after the merge, developers need to engage in development and testing to minimize potential network failures, enhance decentralization, and expand the network.

The Ethereum roadmap indicates that distributed validator technology will be the next key focus after the merge. According to the latest report from Messari, DVT can enhance the security of validators and may become one of the main developments for the Ethereum network.

What is DVT?

Distributed Validator Technology (DVT) is similar to multi-signature consensus voting, allowing Ethereum PoS validators to operate across multiple nodes or machines, enabling validators to vote across various nodes. The core purpose of this technology is to support Ethereum's distributed operations. This technology first appeared in research papers by members of the Ethereum Foundation, originally referred to as SSV. Through a 3-of-4 setup (concept explained below), DVT allows individuals, groups, or community nodes to collectively form a single validator. DVT increases fault tolerance for validators, allowing them to continue operating even if one node fails during the validation process, thus eliminating the risks of single points of failure, double-signing penalties, and fork penalties.

Related Concepts

・Consensus: The responsibilities of a single validator are distributed among multiple co-validators, requiring consensus among co-validators to sign messages.

・M-of-N Threshold Signatures: The validator's private key is divided into N parts, with each validator holding 1/N. Once M validators agree and sign, the signature is completed.

How It Works

DVT consists of four key components: Distributed Key Generation, BLS Signatures with Shamir's Secret Sharing, Secure Multi-Party Computation, and DVT BFT Consensus Layer.

・Distributed Key Generation (DKG): Cryptographic private keys are distributed among all participants, preventing any single party from directly controlling the entire private key.

・Shamir's Secret Sharing: This refers to splitting the private key and distributing it to different participants. To reset the private key, a predefined threshold of shares (e.g., 3 out of 4) must be combined.

・Multi-Party Computation (MPC): Multi-party computation is crucial in distributed validator technology. By scaling computations, operators can use their shared private keys to sign messages and perform calculations without needing to reconstruct them on any single device; MPC allows operators to securely coordinate key generation and reconstruction across different machines in a distributed manner.

・Consensus Achievement: Fault tolerance is achieved through the consensus algorithm of the threshold signature scheme among Beacon nodes. Once ETH validators connect with Beacon nodes, consensus can be reached.

As shown in the diagram above, the DVT operator first calculates the process of generating shared public and private key encryption; then the split private keys are shared with different participants, while the private key shares are distributed to the operators; next, the operators randomly select validation nodes through multi-party computation (these nodes will share information with other nodes), and the participating validators can reach consensus after authenticating through predefined thresholds.

Why is DVT Needed?

DVT aims to address many issues that arise after the merge, with centralization being the core threat to tackle. Additionally, under the influence of protocol rules, issues such as validator asset impairment and declining stability of the Ethereum ecosystem also need urgent resolution.

Centralization Risk

Ethereum rules stipulate that users holding less than 32 ETH will be restricted from maintaining validators. For these users, staking services are the only solution, which further leads to a significant amount of crypto assets being stored in centralized exchanges. Ethereum's largest staking service provider, Lido Finance, has deposited over 4 million ETH, accounting for 32% of the total staked crypto assets. When a large amount of crypto assets is deposited in exchanges, threats such as hacking, unreasonable censorship, and technical errors can jeopardize the Ethereum ecosystem, resulting in centralization risks.

Single Point of Failure

Private keys are crucial for independent validators because once a private key is lost or forgotten, assets become inaccessible. After the merge, the PoS protocol rules prohibit redundancy, meaning each validator can only sign with one validator. This implies that if issues such as node downtime or hacking occur, a single-node validator lacking fault protection can lead to direct impairment of validator assets, further affecting the overall stability of Ethereum.

Double Signing Penalties

If a validator uses the same key to sign multiple times, network failures or cloud issues causing them to go offline will result in the user losing part of their staked amount.

Fork Penalties

Under the PoS system, if a Beacon node connected to a validator fails, a fork will be established. However, in such cases, the affected validator will be deemed offline and still face penalties.

The consequences of centralization and concentration are contrary to the goals of blockchain, and security threats and asset penalties can have negative impacts. To address these challenges, distributed validator technology has emerged.

What is the Development Potential of DVT?

DVT is expected to enhance the decentralization, security, and operational efficiency of Ethereum.

Advantages

As a validator operating in a node cluster, DVT has high resilience and lower risk, thus improving the stability of staking.

・For large validators, DVT can ensure high availability and reduce infrastructure costs: Improved redundancy and lower slashing risks allow fewer validators to operate more nodes, thereby reducing hardware costs; by allowing client configurations and addresses to run across multiple nodes, DVT can lower the failure risk of a single address or client.

・For small validators, DVT can provide a protection level comparable to larger validators: Using DVT, small validators can achieve efficiency similar to larger validators; by lowering the ETH requirements for operating nodes, DVT enables users to utilize community staking pools or home validators for validation.

・For liquid staking protocols, DVT can improve efficiency, reduce risks, and allow operators to participate: By providing redundancy within the network, DVT no longer relies on any operator that may cause offline downtime; additionally, operators can organize into different clusters, enhancing the performance of staking protocols.

Use Cases

・Application in decentralized staking pools: With DVT, staking pools can switch to a decentralized model, reducing penalties and slashing by minimizing downtime.

・Staking infrastructure providers: Through DVT, infrastructure providers can enable active-active cluster redundancy, achieving dynamic deployment and configuration. Previously, to meet individual or institutional staking needs, infrastructure providers had to offer redundancy solutions for active-passive configurations. Now, active-active redundancy aims to ensure that redundant systems can always operate, distributing validators across multiple machines to create fault tolerance.

・Setting up independent validators: With DVT, validators can distribute signing authority across multiple nodes in an active-active cluster redundancy, thereby minimizing the risks of signing failures and penalties due to downtime or double signing.

Related Projects

Since the introduction of DVT, both Obol Network and SSV Network have developed projects based on DVT.

1. Obol Network

Obol Network has launched the plugin client Charon to enable DVT, allowing it to operate in a fault-tolerant distributed manner. By adapting DVT technology, Obol introduces active-active redundancy to address the shortcomings of operating active-passive systems. Validators do not run on a single machine but across multiple machines to create fault tolerance, enduring partial node failures. By communicating and reaching consensus, multiple Charon clients act together, simulating a unified validator. In this process, Charon enables validators to use any client that supports the Beacon Chain standard HTTP API and maintain existing remote signing infrastructure. Thus, for validators, Charon provides an easier adoption pathway.

In terms of future development, Obol Labs will continue to focus on DVT, promoting its application in cryptography and cryptoeconomics.

2. SSV Network

SSV Network has released a network infrastructure layer for decentralized staking. In the SSV model, each validator needs to select 4 nodes from the operator network for multi-signature voting. SSV Network has two different layers: the SSV peer-to-peer (P2P) network layer and the Ethereum contract layer for network governance. The former primarily reads the operator list and validator stake distribution from smart contracts to operate validators; the latter mainly adds operators and allocates assets based on DVT operator rankings and evaluations.

Currently, SSV Network has funded multiple projects applying DVT, and it will continue to focus on building applications using decentralized Ethereum staking infrastructure.

Conclusion

For users, DVT addresses many challenges in staking, lowering the entry barrier for ordinary people. For developers, DVT is equally beneficial. With DVT, institutions or independent validators can enjoy the security and flexibility of the protocol, benefiting from active-active redundancy configurations and achieving operational diversification based on various factors. It is anticipated that in the near future, DVT will empower staking, enabling complementary validator configurations and collaborative work, thereby achieving a truly decentralized Ethereum.

References Understanding Distributed Validator Technology (DVT) What is DVT and How Does It Improve Staking on Ethereum? Biggest Ether Staking Service Has a Centralization Problem Assessing the role of 'Distributed Validator Technology' in ETH's anticipated growth